Books I read in 2013

In 2013 I downloaded the Kindle app for my iPhone. It changed my life. Now I can read on the Tube, on trains, on planes, and when I’m waiting for people to arrive at a meeting. I almost don’t mind when flights are delayed or when people don’t turn up.

At first I wrote a paragraph review of all of them, but due to criticisms that were entirely correct, I’ve cut it down to my top books. Here are the books I read last year.

The information by James Gleich – This is the best book I read in 2013. It was not the best because it was easy to read. In fact, I often wondered where the book was going or why so much detail on various mathematical and scientific ideas was necessary. The book was important because I knew very little about Information Theory and Claude Shannon. After reading the book, I have no doubt Claude Shannon is the godfather of the digital age and one of the most important minds of the 20th century. His thinking helped create the computer age, modern communications and the ability to encode and decode messages. He was a genius and by his mid-thirties has created the intellectual foundation for everything we use today. It is shocking that Einstein and Feynman are well known, but Shannon is little known. His masters thesis at MIT was the most influential masters thesis of all time. He pioneered the application of Boolean logic to electronic circuitry. His work in the 1940s established a theory for communication and information. If you’re reading this blog post, you’re relying on mathematical and computer insights that he created. In World War II, he wrote a paper that became the bible of cryptanalysis and code breaking. Claude Shannon influenced every aspect of transmitting information and coding and decoding it. He is a fascinating character. His first wife divorced him because he sat around thinking and playing the clarinet. He obviously was deep in thought, but he mellowed later in life and was remembered for spending his last years building mechanical mice that could navigate mazes and computer programs that could juggle balls. At Bell Labs, he rode his unicycle through the hallways. If you don’t know about Claude Shannon and his ideas, you should.

The Idea Factory – I read this after reading The Information, primarily because Shannon worked at Bell Labs. He was very productive before Bell Labs, but he wrote his work on Information Theory while at Bell Labs. This book tells the story of Shannon, Shockley, Bardeen and others who revolutionized the way we live. (Bardeen is the only man to win two Nobel Prizes.) AT&T was a big monopoly, but to improve its own business and create a better image, it established a research group that would work on scientific discoveries. The lab was spectacularly successful, and members of the lab received seven Nobel Prizes. They discovered or created the transistor, the laser, C programming language, radio astronomy, etc. You have to read this book if you want to understand how the digital age came about.

The Man Behind the Microchip – When William Shockley created the transistor he ego was so big that he left Bell Labs, he moved out west to start a transistor company. He hired some of the brightest minds and created his own company. Unfortunately, he was a tyrant and they all divorced. Bob Noyce, one of the men who moved out to Palo Alto, picked up the pieces and created Fairchild Semiconductor and Intel. This biography of Noyce is one of the best books I’ve read on the history and creation of Silicon Valley. It tells the story of a wildly gifted young man who not only could think clearly and creatively (he deserved a Nobel Prize), but he was also a bold business leader. Noyce was a mentor to Steve Jobs and countless other founders.

Dealers of Lightning: Xerox PARC and the Dawn of the Computer Age – The other great institution of innovation in America after Bell Labs was Xerox’s Palo Alto Research Center (PARC). The conventional wisdom is that it was a business failure and Steve Jobs rescued the mouse, and so commercialized the findings that Xerox was too foolish to pursue. While there is some truth to it, the lab invented the laser printer, and that more than paid Xerox’s bills for decades. The icing on the cake was the a group of pioneers developed Ethernet, the modern personal computer, graphical user interface (GUI) desktop paradigm, and object-oriented programming. If you’re reading this post on a computer, everything that you are doing was invented at Xerox PARC. Steve Jobs brought many of these things to you in a faster, better way, but he didn’t invent them himself. He packaged them beautifully within Apple products.

Steve Jobs by Walter Isaacson – I don’t really need to write much about this book, as it has been a major bestseller. Everyone on the planet read it after Jobs died. What truly surprised me about the book was the extent of Jobs’ complete disregard for others in pursuit of a greater technological goal. To borrow a phrase from George Bernard Shaw, “The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.”

Margin of Safety by Seth Klarman – This book is out of print and sells for hundreds of dollars on eBay and Amazon. Sometimes it sells for over a thousand dollars. It has become a cult classic, and if you read it today you’re likely reading a scanned copy as the original is almost impossible to get a hold of. Klarman runs Baupost and has annualized about 20% a year since the early 1980s. He’s a practitioner as well as a superb teacher like Buffett. Every investor should read Graham and Klarman.

Essays of Warren Buffett – This book collects in one place all the letters from Berkshire Hathaway and essays that Warren Buffett has written over the years. Buffett is a great investor, but he’ll likely be remembered much more for the clarity of his thought and his ability to teach. If you want to learn lessons for investing and managing a business, this is one of the best books you can read.

The Ten Commandments of Business Failure – Warren Buffett recommended this book. It is a short read, but it should be essential reading for any manager or CEO. There are no rules for success as a manager. However, there are a few things that will guarantee failure. In this book, you can find out what you should do if you want your organization to fail. The book is not only useful, but it is also very funny.

Outsiders by Thorndike – Warren Buffett recommended this book in his annual letter. The book is devoted to exceptional CEOs who created hundreds of billions of dollars of value for their shareholders: Henry Singleton, John Malone, Warren Buffett, William Stiritz, Catherin Graham, and others. This is one of the best business books I’ve read. It focuses on CEOs who allocate capital intelligently. Sometimes, this involves buying back shares. Unfortunately, the entire world is now reading it and drawing the wrong conclusion. CEOs and the media now think that share buybacks are a good idea no matter what the valuation or the alternative uses of cash. As Singleton said in the book, “If everyone is doing it, something must be wrong.” Share buybacks are only accretive if you can buy back your shares below intrinsic value. Simply reducing share count to raise GAAP EPS does nothing for a company.

Damn Right, biography of Charlie Munger – Everyone knows Warren Buffett, but not everyone knows Charlie Munger. The Nobel Prize winning physicist Richard Feynman once said, “I have a limited intelligence and I apply it in a particularly direction.” That pretty much sums up Warren Buffett’s great genius. He’s focused and applies it to investing. Charlie Munger is also an investor, but you get the sense from reading his biography that he is greatly influenced in ideas and learning to a greater extent than Buffett. Munger became my new hero in investing after reading this book.

Influence by Robert Cialdini – This book is one of Charlie Munger’s favorite books. Cialdini is an expert in understanding the psychology of persuasion and influence. He examines influence in advertising, marketing, politics, etc. If you’re interested in psychology and in understanding how humans make decisions, then I highly recommend this book.

Bloomberg on Bloomberg – This is partly an autobiography of Michael Bloomberg, but it is much more the story of the creation of Bloomberg, one of the most successful companies of the late 20th century. Bloomberg came from being a small startup to dominating the financial information and news business in less than twenty years. The business is extremely cash flow generative and crushes its rivals. If you want to see how Bloomberg thinks and how the company works, read this book. Interestingly, Bloomberg’s company was his second act after being a bond trader. This only goes to show that in your late thirties and forties, you’re only just starting out in life.

Made in America: the Walmart Story – This is also part autobigaphy of Sam Walton and part the story of WalMart. The two go together, as Sam Walton was completely focused on his business. Interestingly, Walton didn’t start WalMart until he was run out of town at the age 44. He had to go to another town to start a new business, and that is when he decided to start his own store. He was completely focused on one thing, and that was profitably driving higher volume through lower prices. Almost no one could compete with him given his intensity and focus. I highly recommend this book.

Surely You Must Be Joking Mr Feynman – Richard Feynman was like Einstein in that he was a physicist who became a figure of popular culture. He won a Nobel Prize for his work on quantum electrodynamics. He lived a colorful life and worked on the Manhattan Project and then taught at CalTech. Over a period of years, Feynman’s conversations with his friend Ralph Leighton were first taped and then set down as they appear in the book. I can’t recommend this book and other books on Feynman enough. They’re filled with wonderful anecdotes.

What Do You Care What Other People Think – This book is filled with touching, funny and brilliant stories of Feynman’s life. One of the most moving parts is his recollection of his times with his first wife Arlene, before she died. The book is a marvel and makes you happy that Feynman left his thoughts to us. It makes me wish for more Feynmans in the world.

The Box – I finally got around to reading this book after The Economist and Bill Gates declared it one of the best books of the past few years. The book is highly detailed, and you will come away knowing far more about how to load a ship, how dockworkers got paid, and the intricacies of trade legislation than you’d ever want. But the book documents the inevitable rise of containerization. While almost all vested interests fought containerization for their own short term benefit, the long term benefits of greater trade meant that today ports are far larger, more efficient, and our economies are far more interconnected than we ever could have imagined only fifty years ago. Containerization has affected the growth of cities in China, the resurrection of the freight railway in America, and provided retailers with cheaper products than they could have imagined. Personally, I think the mass adoption of containerization and the opening up of China is responsible for two major trends: 1) rising income inequality and 2) low prices. The ability to manufacture and ship anything anywhere has led to a huge increase in GDP in emerging markets, but it has exposed low skilled workers in developed countries to competition from anywhere in the world. Location in production is no longer critical.

The Smartest Guys in the Room, the story of Enron – This was one of the most enjoyable business books I read in 2013. The book showed how the media, Wall St and investors willingly participated in a collective delusion fostered by a company that hid its dysfunctional business via accounting shenanigans. As Pascal said, “People prefer to believe what they prefer to be true.” Eventually, hope ran out and the accounting fraud was discovered.

The Frackers – The fracking revolution in the US has radically altered the oil industry and collapsed the price of natural gas. This book tells the story of fracking through a few key characters. One of the most colorful characters is Aubrey McClendon (Kate Upton’s cousin-in-law for those of you who don’t follow fracking). The book is worth reading, but as an investor the simple insight from the book is that oil and gas companies are generally bad for the shareholder and great for insiders. They companies are money pits requiring constant infusions of new equity and debt in order to grow. They are like perpetual motion machines, except if they stop, they all come apart. I doubt outside shareholders have made any money from free cash flow of oil and gas companies in the past few years.

The Templeton Touch – Sir John Templeton is one of my heroes. He was a Rhodes Scholar from Tennessee. He started the Templeton funds and invested internationally until his 90s. He was a contrarian his entire life and bought 100 stocks when World War II broke out. He invested in Japan in the 1960s when no one touched it, and he sold and shorted the Nikkei when everyone was seduced by high returns. Even in the last years of his life, he was putting on brilliant trades like buying South Korea during the Asian Crisis and shorting internet stocks in 2000. If I could be like any investor, it would be like Sir John Templeton.

The Innovator’s Dilemma – This is one of the bestselling business books ever. It is also one of the few business books that Steve Jobs liked. The key idea in the book is that mature companies behave in perfectly rational ways by pursuing profit from existing businesses rather than investing in new, disruptive technologies or businesses. In the short run, existing customers are poorly served by unproven, small scale technologies. However, in the longer run, as the new technology becomes cheaper and can begin to scale, it will radically change the nature of the business. This is true for almost any industry: mainframes to computers to PCs to mobiles, or smaller and smaller hard disk storage.

The Four Cornerstones of Value by McKinsey – While I don’t think that much of the advice of management consultants is worth much, this book is one of the better books I’ve read on financial analysis. It does a very good job of looking at the source of shareholder returns, focusing on returns on capital and growth.

How to Win Friends and Influence People – This is an excellent book that everyone should read at least once a year. The world would be a better place if we all thought more about how to treat other people well.

The Essential Wooden, about John Wooden – John Wooden was one of the most successful basketball coaches of all time. He led UCLA to ten NCAA championships. He was a very wise man who taught his players to be more than champions. He taught them to be good people. One of the key insights is that he never asked his players to win. He asked them to always give 100% and do their very best. He set a very high bar for quality, and kept his players focused in every single game. He said if they gave 100% and lost, he was satisfied, but if they didn’t give 100% and won, he was unhappy. This is a great insight that applies to almost any field. The key is to give 100% and set a very high bar.

The Most Important Thing by Howard Marks – Howard Marks is a legend in the world of investing. He manages Oaktree, which has one of the best long term investing records around. This is one of my favorite books, and it is full of practical wisdom.

Mastery by Robert Greene – After reading The 48 Laws of Power, I decided to see what other books Greene had written. Mastery is a very longwinded book that often rambles and is like an smorgasbord of information from books on how to be successful. However, one of the key insights of the book is that any apprentice needs to be willing to leave the master to be successful. This is a very big life lesson. Sometimes this involves conflict, but it is always necessary to learn from a master and then embark on one’s own.

The Art of Seduction by Robert Greene – Continuing with my Robert Greene reading stint, I read this book. This is a fascinating book that divides people into archetypes. The game of seduction involves recognizing what archetype a person is and then understanding their motivations and modus operandi. Interestingly, I could place almost all the people I knew within one of the major female and male archetypes in the book. The book is a fascinating psychological study, more than it is a guide to seduction.

The Men who Would be Kings, the story of Dreamworks – This is a great book about the history of Dreamworks and the partnership between Geffen, Spielberg and Katzenberg. I highly recommend this book to anyone interested in Hollywood history. I learned a lot about studios, film budgets, and business strategy.

The Hollywood Economist – This book is a fascinating read that shows how the Hollywood economy works. After you finish it, you’ll understand first dollar gross, back end, and residuals mean. I recommend this to anyone working in the entertainment industry.

How to Build a Mind by Raymond Kurzweil – Kurzweil is a huge figure in the field of artificial intelligence and neural networks. He has made major advances in speech recognition, musical synthesizers, and optical readers. If you’re interested in cognition and how human brains and pattern recognition systems work, I highly recommend reading this book.

As a Man Thinketh – My grandfather gave me this book before he died. It is a very short book that is worth reading regularly. It has a collection of sayings and aphorisms.

The Einstein of Money – This is biography of Benjamin Graham, the father of value investing. Graham was not merely a business teacher and Warren Buffett’s mentor. He was a polymath who was well versed in English literature, classics and a man who spoke many languages. The book is a fascinating study of the history of value investing, but it is a wonderful portrait of a type of investor that is all too rare.